By John Vandermosten, CFA
NASDAQ:GRCE
READ THE FULL GRCE RESEARCH REPORT
Grace Therapeutics, Inc (NASDAQ:GRCE) will soon submit its new drug application (NDA) to the FDA, which we expect in the next few weeks. The company recently held a pre-NDA meeting with the FDA and came away feeling closely aligned with the agency in terms of what is required for NDA acceptance. The company is in a strong position as it makes its application with a balance sheet with approximately $20 million as of March 31st, 2025 and a product that meets a profound unmet need. During previous equity capital raises, Grace was able to structure these deals so that the attached warrants could be called upon achieving certain milestones. The company will be able to demand exercise of warrants that can potentially generate about $7.6 million following NDA acceptance and about $15 million following approval of GTx-104 assuming the warrants are in the money.
With the funds on the balance sheet and additional capital raised from the warrant exercises, Grace will be able to begin commercialization activities. Its plan is to focus on the top 250 to 300 hospitals that address aneurysmal subarachnoid hemorrhage (aSAH), which is achievable with a sales force of 15 to 20. We expect to hear more about the strategy following NDA submission and the conclusion of marketing studies the company is conducting.
Investment Thesis
Grace’s GTx-104 investment thesis is straightforward. There are about 40,000 aSAH cases per year in the United States that in many cases are inadequately served. Oral nimodipine is standard of care. The underlying drug has demonstrated its efficacy in increasing blood flow to the brain, reducing brain damage and improving neurological outcomes. However, nimodipine is only available in oral form which presents several shortcomings. The primary weakness is that the oral formulation is difficult to administer to patients that are unconscious or have a hard time swallowing, which is a common feature of aSAH patients. Oral nimodipine should be administered every four hours due to its short half-life and it should not be taken with food as this reduces its already low bioavailability. Nimodipine’s oral bioavailability is low and variable, with extensive first-pass hepatic metabolism and poor solubility contributing to reduced systemic exposure. Higher blood plasma levels can cause hypotension which is associated with neurological impairment, organ damage, reduced kidney function and other risks. Europe offers an IV formulation of nimodipine branded Nimotop; however, the product solubilizes the drug with high levels of ethanol and propylene glycol. These excipients have numerous negative effects and prevented FDA approval of Nimotop. Grace’s IV formulation uses excipients generally recognized as safe (GRAS), and provides a product which is able to improve upon the ethanol-based European version and the oral formulation’s primary weaknesses.
Results from Grace’s Phase III safety trial found excellent relative dose intensity, better outcomes, fewer intensive care unit readmissions and fewer ventilator days for GTx-104 compared with oral nimodipine. The trial met its primary endpoint of the number of patients with at least one episode of clinically significant hypotension reasonably considered to be caused by the drug. Patients receiving GTx-104 experienced a 19% reduction in at least one incidence of clinically significant hypotension compared to oral nimodipine (28% versus 35%). Secondary endpoints include safety, clinical and pharmacoeconomic outcomes. Additional detail on the trial can be found in Grace’s press release and in our report.
We assign Grace a $12.50 valuation which provides upside of over 4x. It is a relatively lower risk development play as the underlying drug is already approved, the new formulation addresses significant unmet needs and all of the development work is complete, generating compelling results. While the company plans to develop GTx-104 itself, we think that additional value could be recognized if an established pharmaceutical company buys the asset and folds it into its operations.
The Company
Grace is a clinical-stage, biotechnology company focused on rare disease. Its lead program is advancing GTx-104, a novel injectable formulation of nimodipine for the treatment of aneurysmal subarachnoid hemorrhage (aSAH). GTx-104 is an intravenous (IV) formulation of nimodipine that is a better alternative to the oral version for treating patients that are unconscious or unable to swallow, which is common for those suffering from an aSAH. Nimodipine is approved for subarachnoid hemorrhage due to its ability to prevent vasoconstriction following an aneurysm. In several studies, the drug has demonstrated that it can improve neurological outcomes and boost recovery in aSAH patients. Despite its benefits, approved nimodipine presents several shortcomings due to its oral formulation which makes it difficult to deliver to unconscious patients. Low bioavailability and other drug characteristics contribute to highly variable levels of blood plasma levels. The variability can lead to hypotension and poor outcomes.
aSAH affects up to 40,000 individuals in the United States every year and has a global incidence ranging from 9 to 11 per 100,000 persons. Women are more likely than men to suffer the rupture and the highest incidence occurs around a person’s sixth decade. Symptoms of the condition include a sudden, severe headache, neck stiffness, nausea and vomiting among others. The patient should immediately go to the emergency room where he or she will be triaged to diagnose aSAH and to transport them to a specialized center such as a neurointensive care unit (Neuro-ICU). After diagnosis treatment includes surgical clipping or endovascular coiling. After the patient is stabilized with an emphasis on strict blood pressure control, he or she is administered oral nimodipine to prevent vasospasm over the next two or three weeks. This allows sufficient blood flow in the brain to protect brain tissue and allow for effective healing.
Grace recently completed its Phase III STRIVE-ON trial and is planning to submit its NDA via the 505(b)(2) pathway. Based on the company’s commentary we see submission in the next month, acceptance of the NDA by late summer and a target action date by mid-2025.
Milestones
- Pre-NDA meeting with FDA – 2Q:25
- NDA submission to FDA – mid-2025
- $7.6 million warrant exercise if NDA accepted & above $3.00 strike – Fall 2025
- Target Action Date – mid-2026
- $15 million warrant exercise if GTx-104 approved & above $3.39 – Fall 2026
- GTx-104 commercialization – late 2026
Resources
Summary
Grace is valued at less than $40 million, with half of this value in cash on its balance sheet. The company holds no debt and is on the cusp of submitting its NDA to the FDA in the next few weeks. We think product sales could peak at several hundred million dollars, which suggests substantial upside even with a low single-digit multiple of sales. GTx-104 addresses many of the shortcomings of oral nimodipine in treating aSAH and we think it is an easy sell to hospitals as it can significantly improve outcomes and help hospitals maintain their reputations and stroke center certifications. With results from its Phase III safety trial ready and the pre-NDA meeting under its belt, Grace will soon submit its NDA to the FDA and should see a target action date in mid-2026.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.